Viewpoint: Blockchain: A Solution in Search of a Problem?

By Greta Bull

Countless column inches have been dedicated to distributed ledger technology (DLT) and blockchain since Bitcoin burst onto the global scene in 2009. Since then, numerous financial institutions, governments and other organizations have experimented with testing and implementing blockchain solutions. This includes development organizations such as the World Bank, IMF and the United Nations. Despite breathless enthusiasm and substantial investment, we have seen relatively few DLT applications successfully introduced at scale outside of cryptocurrencies (and these are a whole other can of worms). At CGAP, we have been thinking about which blockchain applications might make sense for financial inclusion, considering use cases such as retail payments, cross-border payments, remittances and agricultural value chains.

The question we have is not “Does blockchain work?” but “Does it work better than other technology solutions in the market?” And what are the cost-benefit trade-offs to switching to a new consensus-based technology solution? We have seen lots of proofs of concept that it can work, but not a lot of quantified analysis on why a DLT solution might be better than existing alternatives.

So, to what extent is blockchain a solution in search of a problem? There are a few important hurdles for those considering blockchain solutions in the financial inclusion space.